In a recent move, the Russian government has imposed a ban on cryptocurrency mining in six regions, including Dagestan, Ingushetia, Kabardino-Balkaria, Karachay-Cherkessia, North Ossetia, Chechnya, as well as the Donetsk and Luhansk People’s Republics, and parts of Zaporizhzhia and Kherson regions. The ban also extends to certain areas in Irkutsk, Buryatia, and the Trans-Baikal Territory, though the restrictions will only apply during periods of peak energy consumption, from January 1 to March 15, 2025, and from November 15 to March 15 in subsequent years.

According to the government decree, the regions affected by the ban may be subject to future adjustments based on decisions made by the government commission on energy sector development. The primary goal of these restrictions is to maintain energy consumption balance, especially in regions with high energy demand, and ensure the reliable supply of electricity to local industries.

Experts Weigh In on the Ban

Experts suggest the mining ban is not solely due to the energy shortage but also driven by the energy subsidies provided in certain regions. Sergey Kolobanov, Deputy Director of the Center for Economics of the Energy Sector (CSR), noted that the low electricity costs in some regions are subsidized by consumers and businesses from other parts of the country. This practice, known as interregional cross-subsidization, has created an imbalanced situation, with residents and businesses in central Russia effectively covering the energy costs in other regions like the North Caucasus and the Far East.

“The restrictions on cryptocurrency mining are aligned with the phase-out of these subsidies, which is expected to end by 2025,” explained Kolobanov. “Once the energy market is liberalized, these restrictions could be lifted, provided there is enough energy capacity.”

Vladimir Klimanov, Director of the Center for Regional Policy at the Presidential Academy’s Institute of Public Administration and Regional Policy, highlighted the long-standing issue of electricity pricing disparities. He explained that residents and businesses in central Russia have historically subsidized the lower electricity rates in regions like the North Caucasus and the Far East, which has created a distorted market for energy. The government’s latest measures are seen as an attempt to correct these pricing imbalances and create more fair business conditions for the mining industry across the country.

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The Legal Landscape of Crypto Mining in Russia

Since November 2023, cryptocurrency mining in Russia has been legalized under specific conditions. Miners are now required to register with the Federal Tax Service (FTS) and report their digital assets and wallet addresses. This registration is mandatory for individual entrepreneurs and legal entities. Meanwhile, private individuals can mine digital currencies but are restricted to 6,000 kWh per month.

The government’s new decree marks another step toward regulating cryptocurrency activities in Russia, as the country seeks to balance its energy demands with its growing interest in blockchain technologies and cryptocurrency markets.

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